Bitcoin Exchange Mt. Gox Goes Dark After Theft Report

Kolin Burges, a self-styled cryptocurrency trader and former software engineer, was among a small number of protesters outside the Tokyo offices of bitcoin exchange Mt. Gox on Tuesday.

Toru Hanai
/ Reuters/Landov

Originally published on March 5, 2014 4:10 pm

"The website of major bitcoin exchange Mt. Gox was offline Tuesday amid reports it suffered a debilitating theft, a new setback for efforts to gain legitimacy for the virtual currency," The Associated Press reports.

Around midmorning in the U.S., the company released a statement saying it had closed off transactions "to protect the site and our users." It offered no further details.

The news about what's happening to the Tokyo-based Mt. Gox has roiled the market for the virtual currency, CNBC writes:

"The price of bitcoin fell to $425 by 6 a.m. London time, according to CoinDesk[,] which tracks the price on a selection of major exchanges, after starting the day at $545, but rebounded shortly afterwards. The price of the currency on Mt Gox had fallen to around $100 before the exchange's website became inaccessible."

According to the BBC, Mt. Gox has been dealing with "technical issues" in recent days and earlier this month had "halted all customer withdrawals of the digital currency after it spotted what it called 'unusual activity.' " That halt led six other major bitcoin exchanges to release a statement Monday condemning what they said was a "tragic violation of the trust of users of Mt. Gox."

Word about "unusual activity" in Mt. Gox's accounts has led to "anger in the bitcoin community with some customers taking to social media to express their dissatisfaction amid rumors that the company could be concealing financial difficulties," CNBC says. It adds that "an unverified document circulating online claims that Mt Gox has lost 744,408 bitcoins (worth around $350 million) due to theft related to the trading fault."

The market for bitcoins has been rocked in recent weeks by other bad news. Earlier this month, as the BBC notes, about $2.7 million worth of bitcoins were stolen from the Silk Road 2 exchange. In January, the CEO of the BitInstant bitcoin exchange and another man were charged with allegedly laundering money for individuals who illegally bought drugs online.

The AP writes that "the cloud hanging over Mt. Gox is a possibly fatal blow to Bitcoin, which was started in 2009 as a currency free from government controls. Supporters have said Bitcoin's cryptography makes it immune to theft or counterfeiting."

If you're looking to catch up on what this bitcoin business is all about:

-- The BBC calls it "a new kind of currency." But, the news service adds, "it may be best to think of its units being virtual tokens rather than physical coins or notes. However, like all currencies its value is determined by how much people are willing to exchange it for."

-- Planet Money's Adam Davidson tried to explain to Comedy Central's Stephen Colbert just what a bitcoin is and warned Colbert to avoid the currency. "Never buy a bitcoin," Adam advised. "There's absolutely no way to know what it's worth in five minutes, let alone five years."